Tiffany Arrives in Westport, Connecticut

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1 A Publication of Madison HGCD, LLC for the Retail Real Estate Industry WHAT S THE DEAL? PAGE 1 ANNOUNCEMENT PAGE 4 INTERVIEW: PRESIDENT, J CREW PAGE 10 No. 3 Summer 2005 Tiffany Arrives in Westport, Connecticut

2 Welcome What s the Deal? Since the last IN STORE, our country has re-elected its president, our world has experienced a terrible tsunami in the Indian Ocean, our economy has continued to grow despite a prolonged war in Iraq and external economic pressures along with continued deficits, and retail in general has sustained a positive growth cycle. If the ICSC Convention in May was any indication, shopping as a national pastime will continue to help fuel this economy in the malls, lifestyle centers and on the streets. Department store consolidation, internet expansion and new models of retailing will continue to evolve this year and well into the future as Americans adapt to changes in the world around them. It is an interesting time indeed. We at Madison HGCD are proud to contribute in small ways to the changes hopefully positive around us. One other way we can contribute is to encourage our clients and friends to remember those less fortunate. Please join us in making a contribution to: The REBNY Foundation, The Tsunami Fund, Real Estate Board of New York, 570 Lexington Avenue, New York, NY Sincerely, Richard Hodos President, Madison HGCD At Deadline We are proud to announce the addition of ESPRIT to Time Warner Center in Manhattan s Columbus Circle. This deal marks the first of five ESPRIT store openings at shopping malls in New York and Virginia as part of their United States expansion program. All of ESPRIT s new mall stores are between 3,000 to 5,500 square feet and are scheduled to open this fall. They will be located at Roosevelt Field Mall in Garden City, NY; Staten Island Mall in Staten Island, NY; Tysons Corner Center in McLean, VA; and at Leesburg Corner Premium Outlets in Leesburg, VA. Much like ESPRIT s other Manhattan locations at 110 Fifth Avenue in the Flatiron District and 583 Broadway in SoHo, the Time Warner store neighbors popular retailers like A/X Armani Exchange, J.Crew, Sephora and Coach. ESPRIT opened its doors at the Time Warner Center in June In addition to the 200 Park Avenue opening in Manhattan, we also closed a deal that will bring cosmetic giant, Sephora, to Greenwich, CT. The new store, which will open later this year, will consist of 5,600 square feet and will be located at 75 Greenwich Avenue. We recently closed a deal on behalf of The Body Shop at 154 Spring Street in Manhattan. The store will consist of 1,600 square feet and is expected to open in time for this holiday season. In May we helped close a transaction on behalf of Japan-based handbag designer Samantha Thavasa at 965 Madison Avenue. The store will consist of 1,200 square feet at grade, with 700 square feet on a lower level. In Manhattan Sur La Table is coming to Manhattan! We closed a deal with the premiere kitchenware retailer for its first Manhattan store, located at 75 Spring Street in SoHo. The store comprises one selling level of approximately 5,000 square feet, plus a storage basement, and it is expected to open in the third quarter, We helped advise Brookfield Properties on their restaurant RFP at The World Financial Center. The RFP was done in mid summer 2004, and it culminated in a long-term deal for the lower level space formerly occupied by Moran s Restaurant. PJ Clarke s has signed a lease for this space. P.J. Clarke s on the Hudson, which was completed at The World Financial Center, measures approximately 7,500 square feet on the ground floor with outdoor seating on the water with views of the Statue of Liberty. Madison HGCD also helped Brookfield add The Financier to its tenant roster. The next time your travel takes you Downtown, stop by and visit The Financier. Pick up a pastry and enjoy a cappuccino at this tasteful little addition to The World Financial Center. In January we closed a deal on behalf of Sephora at 200 Park Avenue South in Manhattan s Union Square. The new store, which opened its doors in June, faces Park Avenue South and Union Square North and is approximately 6,500 square feet. We are proud to announce ESPRIT s flagship location in Manhattan was named 2004 Retail Store of the Year in Chain Store Age s 23 rd annual retail design competition. The team of Richard B. Hodos, Stephen Bartha and Stephen J. Stephanou represented ESPRIT in the deal last P A G E 1

3 P A G E 2 year. In addition to Store of the Year, there were 26 first-place awards, 13 honorable-mention awards and two special awards. A panel of retailers, designers and architects judged the competition. Outside New York In February we closed a 2,600 square foot lease at 1600 Walnut Street in Philadelphia on behalf of Cole Haan. Located in one of the most vibrant areas of Philadelphia, Cole Haan will join the ranks of retailers including Coach, Diesel, Lucky Brand Dungarees, Burberry and Polo Ralph Lauren, as well as a number of restaurants and nightclubs. The street front store is scheduled to open this year. In January, Madison HGCD advised Tiffany & Co. on a transaction in Chevy Chase, Maryland, just outside of Washington, DC where they currently have a store. Stay tuned for updates regarding this transaction in the next issue of InStore or visit our website at In other Tiffany & Co. news, we are proud to announce that the Westport, CT location (40-44 Post Road East ) opened to rave reviews in November Madison HGCD arranged the transaction last year it s nice to see the product of our hard work (A photo of the store is on the cover of this issue s InStore newsletter). Liz Claiborne has selected Madison HGCD to represent the company on a national basis in highly visible metropolitan urban markets. Stephen J. Stephanou and Ginny M. Pittarelli will represent Claiborne s brands including Lucky Brand Dungarees, Juicy Couture, Mexx, Dana Buchman, Ellen Tracy, Elisabeth, and Sigrid Olsen. We look forward to spearheading Lucky Brand Dungarees expanded presence in the Northeast as well as Juicy Couture s expansion into high profile markets around the country. With its first store in Las Vegas at the Forum Shops, Juicy is already positioned to make a big splash in one of the nation s hottest markets. Madison HGCD looks forward to this new partnership and building the Claiborne brand. Barneys New York continues its highly successful Coop expansion program. Having just opened at Phipps Plaza in Atlanta, we are helping Barneys scour the country for locations that fit the demographic and psychographics of its young, hip, urban customer. In May, we helped bring J.Crew Atthe-Beach to the Hamptons. Located at 46 Main Street in East Hampton, the store consists of 1,500 square feet, and opened its doors to rave reviews just before Memorial Day, and has reported phenomenal sales ever since. The only retail location of it s kind, J.Crew At-the- Beach will occupy the space until the end of The High-End Collection at Chevy Chase The new definitive luxury address in the Washington, DC area The Collection at Chevy Chase will comprise 112,000-squarefeet of high-end two-story boutiques on prestigious Wisconsin Avenue in Chevy Chase, Maryland. The Collection will feature Barneys New York, Cartier, Christian Dior, Louis Vuitton, MaxMara, Ralph Lauren and Tiffany & Co. The Collection will enjoy a dominant location in the Washington, DC Metro Area with ease of access and close proximity to Upper Northwest Washington, Georgetown, Northern Virginia and both Reagan National and Dulles International Airports. Linking Saks Fifth Avenue and Neiman Marcus, The Collection incorporates two blocks of streetoriented, high-end retail providing unique storefronts for each retailer with a 9,000-square-foot sculpture garden as the centerpiece. It is easily accessible by car, and the Friendship Heights/Chevy Chase Metro station is just steps away. The high-end brands at The Collection at Chevy Chase will establish already-fashionable Wisconsin Avenue as the Rodeo Drive of the East Coast, said Edward Hall Asher, President and COO of The Chevy Chase Land Company, owner of The Collection. Our tenants will benefit from the location s enviable triple combination of residential, business and tourism clientele. This is the golden formula luxury retailers are looking for. Projections of sales per square foot range from $700 to $2,500, depending on category and size. Resting on the DC/Maryland line, Chevy Chase is the preeminent suburb in the nation s strongest metro economy. The retail market in the Washington area is strong and growing, notes a new report released by research firm Delta Associates. Major national retailers continue to enter this market due to the high per capita income and an expanding employment base. We are excited about the Collection, and were pleased to advise our clients on becoming part of what will surely emerge as the preeminent luxury retail center in the greater Washington, DC area, said Richard Hodos, President of Madison HGCD. Madison HGCD advised both Tiffany & Co. and Barneys New York in transactions to join the high-end retail Collection, which is expected to open in October Relocating to the Collection, along with other respected retailers, is the right move for Tiffany in terms of the growth potential we see in the Chevy Chase area, said Beth O. Canavan, Executive Vice President of Tiffany & Co. Our spacious new store will allow us to create an elegant and equally welcoming environment where we will continue to provide both new and existing customers with the quality, craftsmanship and service they have come to expect from Tiffany. Larry Horton, leasing consultant to the project, said: The designers will be editing their collections for this market, just as their L.A. merchandise would be different from their stores in New York, but they will still provide a full range of product for the Washington market, which is a fashion-conscious customer looking for quality luxury goods. For more on The Collection at Chevy Chase, including architectural elevations, site plan, floor plans and a virtual tour, please visit: com/chevychase/chevychase.html P A G E 3

4 Announcement An interview with Ginny Pittarelli Accompanying this shift is the dramatic advancement in technology, which has enabled more sophisticated economic and demographic analysis. This has made it easier to target consumer groups and hone in on the most advantageous retail locations. To put it simply, we have more information at our fingertips, which allows us to help our clients make more informed and strategic decisions for their needs all across the United States. P A G E 4 We are pleased to announce that Ginny Pittarelli has been appointed Chief Operating Officer of Madison HGCD. Ginny joined Madison HGCD as an Executive Managing Director in 2001 with 20 years of experience in the real estate industry. She has been a significant contributor in the past four years, expanding the presence of existing clients, as well as adding new and exciting clients to the Madison HGCD roster. Her clients include Borders Books, Liz Claiborne, The Body Shop, Sephora, Sur La Table and Wilsons Leather. We wish Ginny continued success and good fortune in her new expanded role. Tell me a little about your background and how you ended up at Madison HGCD. I began my career at Citibank, N.A. where I last served as Vice President/Real Estate Director. Having been involved in all aspects of commercial real estate, my experience at Citibank provided a depth and breadth of knowledge about the industry that has proven to be an invaluable foundation for my career. After 10 years at Citibank, I started my own consulting business where I had the opportunity to work with quality financial and retail organizations. My primary role was to develop and implement strategic growth plans to achieve the targeted goals of my clients. After three years of having my own consulting practice, I felt I needed to be aligned with a large organization again to fulfill the growing needs of my clients. At Jones Lang Wootton, I had the opportunity to develop and direct the National Retail Services Group, which was a new component of the firm s business. After JLW, I was with Trammel Crow Company, and served as Director of their Retail Group in New York City. With 20 years of experience behind me, I felt it was time to use both my consulting and real estate expertise at a boutique firm where I could continue to work closely with my clients, to service their ever-growing and everchanging needs. Madison HGCD provided the perfect environment for me to combine those skills with my continued passion for retail. We are very privileged to currently represent several national retailers including Borders Books, Liz Claiborne, The Body Shop, Sephora, Sur La Table and Wilsons Leather. It s these client relationships that keep me engaged and they are truly the reason why I love what I do. How has the retail business changed in the time you ve been in it? The most dramatic change has definitely been the shift from a local perspective to a far more national and global outlook. Ten years ago, retailers relied on local brokers to expand into different markets. Today, real estate firms have national expansion programs that give retailers access to markets across the country. By utilizing only one provider, retailers receive consistent service and top level product quality. How has Madison HGCD responded to these changes over the years? The partnership with Madison Marquette opened up the door to a wealth of resources, which greatly expanded our capabilities. In addition to improved technological resources, we also gained access to an immediate network of geographically specific brokers. Madison Marquette has become a vehicle for Madison HGCD to maintain a national presence, and stay ahead of the curve at all times. What new markets do you see emerging as hot spots for retail? SoHo has been on the rise for a number of years and continues to emerge as one of Manhattan s hottest retail spots. While national retailers have anchored the neighborhood with locations on Broadway (the new Bloomingdale s in particular), sophisticated retailers like Sur La Table continue to add to the eclectic, yet chic fabric of SoHo. One of the true up and coming neighborhoods in Manhattan is the Meatpacking District. For a full look at this area, please refer to my article in this issue of InStore. What sets Madison HGCD apart from other retail real estate brokerage firms? To have any kind of staying power in this business you must develop strong relationships with clients, and not simply take on a transactional focus. At Madison HGCD we go out of our way to understand our clients business model and to become a true partner in their growth strategy. At the end of the day, we want to see our clients succeed our success depends solely on their success. This focus on building client relationships reflects the way Madison HGCD works on a day-to-day basis. We pride ourselves on fostering a closeknit, team-oriented environment and are very excited about the opportunities that we face in 2005 and beyond. Some of the members of the Madison HGCD team. From left to right: BB Friedberg Reis, Stephen J. Stephanou, Virginia M. Pittarelli, Richard B. Hodos and Maureen T. Lachman. P A G E 5

5 Retail Forecast P A G E 6 Category Department Stores 39% 60% 80% Discount Stores 61% 77% 93% Building Materials 11% 31% 34% Consumer Electronics 15% 34% 41% Drug Stores 18% 33% 46% Supermarkets 18% 14% 26% Though retail sales might not be as robust this year as they were in 2004, retailers are expanding more aggressively than they have since the late 1990s according to reports from industry experts. While the National Retail Federation (NRF) anticipates that retail sales this year will increase only 4.8 percent compared with the 7 percent increase last year, new store openings in the United States are expected to exceed those in 2004 by more than 20 percent. Apparel and home improvement retailers and discounters are leading the dramatic development trend. Motivated by an attractive combination of population and housing growth as well as changing demographics, these retailers continue to enhance their market presence strategically. Despite warnings from the NRF that home furnishings stores could suffer as the housing market declines, and projections from analysts that home improvement sales will increase only 3.5 percent this year compared with 12.1 percent last year, home improvement and home decor retailers continue to embark on ambitious expansion plans. Such aggressive expansion is good news for retail developers and landlords, including those who focus on open-air centers as well as regional malls. Demand from open-air tenants such as T.J. Maxx and Lowe s remains strong, while mall-based specialty stores also continue to grow. More than 2,535 new open-air stores are planned this year, up from 1,995 stores in 2004, according to Merrill Lynch. Similarly, 588 new mall-based specialty stores will likely open in 2005 versus 505 in From a demographic standpoint, Baby Boomers and their offspring, often referred to as Generation Y, are the most important segments of the shopping population. Currently between the ages of 45 and 60, Baby Boomers account for 28 percent of the nation s population, or roughly 79 million people, according to the U.S. Census Bureau. The Generation Y segment, endowed with discretionary income from their parents, is almost as large with 72.7 million people between 11 and 25 years old. Many retailers have been targeting their expansions based on the potent purchasing power of these particular segments. At the same time, the movement toward greater consolidation in the retail industry persists, concentrating more stores into fewer hands. Some sectors have consolidated more than others, but all of them have become more topheavy in recent years as measured by the combined market share of the top three retailers in each category. By every indication, this dual trend of expansion and consolidation will shape the retail industry in the months ahead. P A G E 7

6 Remembering The Dean of American Architecture We would like to pay tribute to the life of Philip Johnson, a prominent American architect who designed some of the most notable buildings of the 20th century. During his nearly 80-year career, Johnson served as both an architecture critic and designer whose innovative approach inspired the likes of Frank Gehry and Peter Eisenmann. For years he was also the most famous public face of American architecture. Johnson left his mark on Manhattan as designer of the New York State Theatre and as part of the team that worked on New York City s Lincoln Center in the early 1960s. One of his most memorable buildings was his Glass House in New Canaan, Connecticut. Located in the woods, the house was an example of the severe modernism that was, for a while, the hallmark of Johnson s creations. I had the good fortune of meeting Philip Johnson in Pittsburgh at the dedication of PPG Place in His buildings didn t always work at pedestrian level, therefore retailers didn t necessarily like them. PPG Place in Pittsburgh, the AT&T Building (now the Sony Building) in New York, and the Crescent in Dallas all had hidden storefronts, confusing layouts, or dark arcades that made retailers cringe. But Philip Johnson wasn t pedestrian. He was a master someone who painted on a large canvas. Johnson s buildings worked at the skyline level and they often gave a city an identity. Whether it was Pennzoil Place in Houston, the Lipstick Building in New York, or PPG Place in Pittsburgh, you could often name the city by the Johnson building in its skyline. In a famous lecture in 1954 at Harvard titled The Seven Crutches of Modern Architecture, he said, Merely that a building works is not sufficient. Maybe, just maybe, we shall at last come to care for the most important, most challenging, surely the most satisfying of all architectural creations: building cities for people to live in. Having recently passed on at the ripe old age of 98, Johnson s life was a gift to all of us. He will be sorely missed and fondly remembered. By Richard B. Hodos Philip Johnson (seated) along with partner John Burgee and models of proposed buildings for Times Square. P A G E 8 The Sony Building (originally built for AT&T) with its signature pediment top. P A G E 9

7 Interview with Jeff Pfeifle, President of J.Crew Interview The man behind J.Crew s Retail Strategy P A G E 10 Tell me a little about your background and how you ended up at J.Crew. I have been President of J.Crew for a little over 2 years. Prior to that, I was the head of design and product for Old Navy a retail concept Mickey Drexler and I created. I also held positions at Banana Republic and Ralph Lauren. How has the retail business changed in the time you ve been in the industry? For me it has always been about the product and the people. Good retailers are always looking at ways to improve their product assortments and focusing on how to help their customers that should never change. How has J.Crew s retail strategy evolved over the years? J.Crew began as a catalog company. We opened our first store in 1989 in New York City s Seaport. We have been building our retail presence since. Our stores are extremely important to us. They give our customers a 3-dimentional J.Crew catalog brought to life. They also come alive with color assortments, great displays and windows. We will continue to look for upscale, quality locations where we know our customers are. What new markets are you looking to penetrate, both geographically and in terms of new lines and products? We are looking at markets where our customers live and shop across the country. We continue to expand on the things that our customers need and want. For example, we launched J.Crew wedding last spring. It is a collection of bridal gowns and bridesmaids dresses and even suits for the groom and his groomsmen. The styles are for the more laid back wedding the bride who does not want to spend $6,000 on a dress but still wants to look great. How important is real estate in J. Crew s overall retail perspective? Location, location, location. It is very important to us and we look at all our current and prospective real estate constantly. What has been your biggest achievement at J.Crew? We are very proud at the work we have done since Mickey, myself and team have been here. There is a new level of quality and style in all our products and it has been great to see our customers respond so positively. Where do you see J.Crew in 5 years? I can t speculate on the future. We just hope to keep our customers happy and shopping with us. P A G E 11

8 My Turn The surest way to lose one s shirt is to overindulge in buttoned-down thinking. Meatpacking District A Rising Retail Star By Virginia M. Pittarelli Chief Operating Officer Madison HGCD P A G E 12 One of the true up and coming neighborhoods in Manhattan is the Meatpacking District. The area is defined loosely by the border of Gansevoort Street to 15 th Street, running from Ninth Avenue to the Hudson River. Having emerged as a high-end fashion designer district, the neighborhood boasts top retailers like Ralph Lauren, Stetson, Calypso, Alexander McQueen, Robert Marc, Dernier Cri, Destination, Jeffrey, La Perla, Lucky Barnes, Scoop NYC and Intermix. Attracting increased foot traffic and discerning consumers, the Meatpacking District has become an alternative destination to more established neighborhoods, such as the Upper West Side. Although the market has been functioning as an actual wholesale food/produce market for many years, the retail presence has only just emerged in the past five years. This The SoHo House in the heart of the Meatpacking District, one of Manhattan s hot new retail areas. development has provided a home for some of Manhattan s trendiest restaurants, like Pop Burger, Lotus, Pastis, Spice Market, Vento, 5 Ninth and Ono (inside Gansevoort Hotel). And even though most of the restaurateurs in the neighborhood are New York based, many of the retailers are from outside the New York area, with a high concentration of London and Los Angeles based retailers settling into the neighborhood. This adds an edgy, sophisticated vibe to the area. This is only the beginning for the Meatpacking District. The opening of the Gansevoort Hotel in the Spring of 2004, the third hotel entry into the neighborhood, signals how rapidly this area is emerging as a popular destination, especially among visitors drawn to the chic, high-design environment. There are several transactions currently in the works, so expect to see a lot of action in this hot spot in the upcoming year. Knowing when to implement a new style of thinking and then adapt to change is what we do best. We put together appropriate retail deals that work...deals that fit the appropriate tenant to the right space... tailor-made for the clients we serve. We re Madison HGCD...always adjusting the way we think about retail, and always a company that won t leave you hanging.

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